Hi-Crush Partners LP (HCLP): Are Hedge Funds Right About This Stock?

At Insider Monkey, we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Hi-Crush Partners LP (NYSE:HCLP) has seen an increase in hedge fund interest lately. At the end of this article, we will also compare Hi-Crush Partners LP (NYSE:HCLP) to other stocks, including Pacific Ethanol Inc (NASDAQ:PEIX), KemPharm Inc (NASDAQ:KMPH), and NeoPhotonics Corp (NYSE:NPTN) to get a better sense of its popularity.

To the average investor, there are tons of indicators stock traders employ to grade publicly traded companies. Two of the most underrated indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can beat the broader indices by a superb amount (see the details here).

Keeping this in mind, let’s take a gander at the fresh action encompassing Hi-Crush Partners LP (NYSE:HCLP).

What have hedge funds been doing with Hi-Crush Partners LP (NYSE:HCLP)?

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 22% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Prescott Group Capital Management, managed by Phil Frohlich, holds the biggest position in Hi-Crush Partners LP (NYSE:HCLP). Prescott Group Capital Management has a $3.8 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $3.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise William C. Martin’s Raging Capital Management, Israel Englander’s Millennium Management, and Bernard Selz’s Selz Capital.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the largest position in Hi-Crush Partners LP (NYSE:HCLP). Millennium Management had $1.9 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated an $0 million position during the quarter.

Let’s check out hedge fund activity in other stocks similar to Hi-Crush Partners LP (NYSE:HCLP). These stocks are Pacific Ethanol Inc (NASDAQ:PEIX), KemPharm Inc (NASDAQ:KMPH), NeoPhotonics Corp (NYSE:NPTN), and Oppenheimer Holdings Inc. (USA) (NYSE:OPY). This group of stocks’ market caps resemble HCLP’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $43 million, vs. the $15 million in HCLP’s case. Pacific Ethanol Inc (NASDAQ:PEIX) is the most popular stock in this table. On the other hand KemPharm Inc (NASDAQ:KMPH) is the least popular one with only 8 bullish hedge fund positions. Hi-Crush Partners LP (NYSE:HCLP) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PEIX might be a better candidate to consider a long position.